Update ASML Holdings (ASML)
I’ve been waiting to see what ASML Holdings (ASML) competitor Veeco Instruments (VECO) would report on July 26. ASML Holdings reported on July 14, the same day as Intel (INTC) and I didn’t want to up my target for ASML Holdings simply out of enthusiasm for Intel’s performance. (For more on Intel’s earnings see my post Update Intel (INTC))
Two weeks later however, Veeco confirmed strength in the chip manufacturing sector. The company announced earnings that beat Wall Street projections by 18 cents a share and revenue projections by 8%, and then raised guidance for the third quarter.
That confirms the July 14 numbers out of ASML Holdings: earnings 17% above projections for the second quarter, revenue 8% above expectations and guidance for fiscal 2010 sales to grow 10% to 15% above historical peak sales. Orders for ASML Holdings lithography equipment, used to etch circuits onto silicon, were 1.18 billion euros in the quarter. That drove the company’s order backlog to 2.4 billion euros as of the end of June.
ASML Holdings was confident enough about growth to predict that it will continue at current levels into 2011.
EMC earnings show continued strength in technology hardware
Not the home run that Intel (INTC) hit with its earnings but EMC’s (EMC) results back up my theory that technology hardware companies with new products offering more power at lower prices and lower operating costs will show strength in 2010 even if the economy stumbles.
In my June 20 post “There’s less bad news in IBM’s earnings than Wall Street thinks” (http://jubakpicks.com/2010/07/20/theres-less-bad-news-in-ibms-earnings-than-wall-street-thinks/ ) I argued that Wall Street had misunderstood the lessons of IBM’s and Intel’s second quarter earnings. Not all technology stocks would report better than expected results for the quarter and guide higher for the year, as Wall Street concluded after Intel’s earnings. Technology hardware companies with new products that promised attractive short-term returns, however, would do well despite IBM’s disappointing results.
Intel was one of these in my opinion. Cisco Systems (CSCO), due to report on August 11, was likely to be another. And EMC, which reported second quarter earnings this morning, would give me a quick test of my thesis.
Today’s (July 21) results from EMC support my argument, I think.
There’s less bad news in IBM’s earnings than Wall Street thinks
IBM’s (IBM) second quarter revenue miss yesterday (July 19)—the company reported revenue grow of just 2% instead of the 4% to 5% that Wall Street had expected—undermined the entire technology sector. Last week after Intel (INTC) reported earnings of 51 cents a share instead of 43 cents and revenue about $600 million above projections, and then raised guidance for the rest of 2010, Wall Street started to believe that technology could lead an economic and stock market recovery.
The fear today, after IBM’s results, is that technology revenue too is headed into a slump.
I think Wall Street is misreading the messages in both Intel’s and IBM’s quarterly earnings report. The technology recovery was never as widespread as some bulls hoped after Intel’s results. But IBM’s disappointing results don’t change the very real, but somewhat narrower, trend in Intel’s numbers. (For more on Intel’s results see my post Update Intel (INTC).)
Update Intel (INTC)
Sales of server chips were up 170% in the second quarter of 2010 from the second quarter of 2009, Intel (INTC) announced last night (July 13) when the company reported earnings.
When I last updated this stock back in April after the company announced first quarter earnings and an increase in gross margins to 63.4% I wrote “The company had been projecting gross margins of 58% to 64%. The increase in gross margins is the key piece of news in this report. To get margins up to that level the product mix at Intel has had to shift toward a higher proportion of sales from more profitable server chips. Industry watchers have recently forecast a two-year cycle of big increases in server purchases as corporate customers upgrade their equipment. Intel seems to be signaling that it’s going to ride that trend to higher margins for more than just the next quarter.”
Cloud computing is the future–here’s how to buy a piece at a reasonable price
Psst! Mister. You wanna buy some cloud? Cloud computing that is.
It is the wave of the future in the delivery of everything from computer software to media products to computer services. Market researcher The 451 Group estimates that revenue for infrastructure as a service, one of the two big categories of cloud computing will grow to $1.2 billion a year by 2013 from $200 million last year. Data storage in the cloud, the other big cloud computing segment, will see revenue climb to $1.7 billion in 2013 from $150 million in 2009, the group estimates.
Even Microsoft (MSFT) in its current update to its cash cow Office 2010 software is taking steps toward the day when most people will buy most of the software they need over the Internet as a service that’s resident on big server farms scattered around the world.
But as survivors of the telecom boom (and bust), the dot.com boom (and bust) and, going even further back, the disk drive boom (and bust) know the future waves in technology can leave investors drowning in a sea of red ink.
So how do you invest in the cloud without getting rained on?
